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Texas Service Sector Outlook Survey

Report in PDF
November 1, 2011

Texas Service Sector Activity Expands but at a Slower Pace

What's New This Month

For this month's survey, business executives were asked supplemental questions on borrowing conditions and credit availability. Read Special Questions.

Texas service sector activity increased in October, according to business executives responding to the Texas Service Sector Outlook Survey. The revenue index, a key measure of state service sector conditions, fell from 14.1 to 4.7, which is indicative of slower revenue growth.

Labor market indicators reflect more hiring and longer workweeks. The employment index edged up to 4.7, its best reading in six months, although two-thirds of respondents noted no change in employment. The hours worked index rose from 0.9 to 5.2 in October, which is consistent with longer workweeks.

Perceptions of general business conditions were mixed in October. The general business activity index remained negative for the sixth month in a row, but the pace of deterioration slowed, with the index advancing from –10 in September to –5.1 in October. The company outlook index moved back into positive territory after two months of negative readings, rising from –0.4 to 5.7, with 19 percent of respondents reporting their outlooks improved from last month.

Price and wage pressures were not much changed in October. The selling prices index came in at 6.3, about the same as its September reading of 6.5. The wages and benefits index edged up from 10 to 12.1, although the great majority of respondents noted no change in labor costs.

Indexes of future service sector activity improved across the board, and expectations regarding future business conditions were more optimistic. The index of future general business activity moved into positive territory in October after posting two consecutive negative readings and the index of future company outlook advanced from 6.5 to 16.9.

Texas Retail Outlook Survey

November 1, 2011 

Retail Sales Growth Slows

Retail Sales Growth Slows

Retail sales increased in October, according to business executives responding to the Texas Retail Outlook Survey. The volatile sales index fell from 18.6 to 9.2, which is indicative of slower sales growth. Inventories rose for the fourth month in a row.

Labor market indicators reflected more hiring and slightly longer workweeks. The employment index jumped up from 5.1 to 16, with 28 percent of respondents noting employment increased from September. The hours worked index came in at 1.6, after posting a negative reading last month.

Perceptions of general business conditions improved in October. The general business activity index came in at 0.8 after posting six consecutive negative readings. The company outlook index surged to 16.9, its best showing in seven months. A quarter of respondents said their company’s outlook had improved from the prior month, compared with 8 percent who noted their outlook had worsened.

Retail prices and wages continued to climb in October. The selling prices index rose from 13.6 to 19.9. The wages and benefits index moved up from 7.8 to 15.6, although the great majority of respondents continued to note no change in labor costs.

Indexes of future retail sector activity moved further into positive territory in October. Future expectations regarding broader economic activity also improved markedly.

The Texas Retail Outlook Survey (TROS) is a component of the TSSOS that uses information only from respondents in the retail and wholesale sectors.

The Dallas Fed conducts the Texas Service Sector Outlook Survey monthly to obtain a timely assessment of the state’s service sector activity. Data were collected October 18–26, and 222 Texas business executives responded to the survey. Firms are asked whether revenue, employment, prices, general business activity and other indicators increased, decreased or remained unchanged over the previous month.

Survey responses are used to calculate an index for each indicator. Each index is calculated by subtracting the percentage of respondents reporting a decrease from the percentage reporting an increase. When the share of firms reporting an increase exceeds the share reporting a decrease, the index will be greater than zero, suggesting the indicator has increased over the prior month. If the share of firms reporting a decrease exceeds the share reporting an increase, the index will be below zero, suggesting the indicator has decreased over the prior month. An index will be zero when the number of firms reporting an increase is equal to the number of firms reporting a decrease.

Next release: November 29, 2011

Texas Service Sector Outlook Survey

November 1, 2011
 

Click on links in the table for greater details. Historical data are available from January 2007 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas
Current (versus previous month)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
4.7
14.1
-9.4
Increasing
24
25.2
54.3
20.5
Employment
4.7
4.4
+0.3
Increasing
20
18.8
67.1
14.1
Part-time employment
0.5
0.4
+0.1
Increasing
2
9.2
82.1
8.7
5.2
0.9
+4.3
Increasing
8
11.7
81.8
6.5
Wages and benefits
12.1
10.0
+2.1
Increasing
25
15.5
81.1
3.4
Input prices
29.2
30.2
-1.0
Increasing
30
32.8
63.6
3.6
Selling prices
6.3
6.5
-0.2
Increasing
10
17.3
71.7
11.0
Capital expenditures
12.4
9.6
+2.8
Increasing
26
21.0
70.3
8.6
General Business Conditions
Current (versus previous month)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
5.7
-0.4
+6.1
Improving
1
18.6
68.5
12.9
General business activity
-5.1
-10.0
+4.9
Worsening
6
14.1
66.7
19.2
Business Indicators Relating to Facilities and Products in Texas
Future (six months ahead)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Revenue
36.5
27.9
+8.6
Increasing
32
49.6
37.4
13.1
Employment
21.4
14.3
+7.1
Increasing
31
33.6
54.2
12.2
Part-time employment
11.2
0.7
+10.5
Increasing
4
15.6
80.0
4.4
3.6
1.2
+2.4
Increasing
26
9.4
84.8
5.8
Wages and benefits
30.2
27.5
+2.7
Increasing
58
33.7
62.8
3.5
Input prices
45.8
43.2
+2.6
Increasing
58
50.4
45.0
4.6
Selling prices
25.3
19.9
+5.4
Increasing
27
33.3
58.7
8.0
Capital expenditures
17.9
15.5
+2.4
Increasing
31
28.6
60.7
10.7
General Business Conditions
Future (six months ahead)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
16.9
6.5
+10.4
Improving
2
28.7
59.5
11.8
General business activity
6.0
-3.2
+9.2
Improving
1
22.4
61.2
16.4

*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening). If zero, indicator is unchanged.
**Number of months moving in current direction.
Data have been seasonally adjusted as necessary.

Texas Retail Outlook Survey

November 1, 2011
 

Click on links in the table for greater details. Historical data are available from January 2007 to the most current release month.

Business Indicators Relating to Facilities and Products in Texas, Retail
Current (versus previous month)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
9.2
18.6
-9.4
Increasing
3
29.4
50.4
20.2
Employment
16.0
5.1
+10.9
Increasing
3
27.6
60.8
11.6
Part-time employment
-1.6
-1.6
0.0
Decreasing
3
8.1
82.3
9.7
Hours worked
1.6
-7.8
+9.4
Increasing
1
12.5
76.6
10.9
Wages and benefits
15.6
7.8
+7.8
Increasing
8
17.2
81.3
1.6
Input prices
30.0
36.2
-6.2
Increasing
15
37.2
55.6
7.2
Selling prices
19.9
13.6
+6.3
Increasing
15
28.0
63.9
8.1
Capital expenditures
17.2
3.1
+14.1
Increasing
7
25.0
67.2
7.8
Inventories
12.9
9.7
+3.2
Increasing
4
26.0
60.9
13.1
Companywide Retail Activity
Sales
9.9
13.1
-3.2
Increasing
5
30.7
48.5
20.8
Internet sales
2.4
2.1
+0.3
Increasing
4
14.3
73.8
11.9
Catalog sales
-2.6
-5.0
+2.4
Decreasing
2
7.9
81.6
10.5
General Business Conditions, Retail
Current (versus previous month)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
16.9
8.8
+8.1
Improving
2
25.2
66.5
8.3
General business activity
0.8
-9.6
+10.4
Improving
1
20.3
60.2
19.5
Business Indicators Relating to Facilities and Products in Texas, Retail
Future (six months ahead)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Increase
%
Reporting
No Change
%
Reporting
Decrease
Retail Activity in Texas
Sales
46.7
23.9
+22.8
Increasing
32
52.2
42.3
5.5
Employment
15.9
12.9
+3.0
Increasing
22
28.6
58.7
12.7
Part-time employment
17.7
-13.3
+31.0
Increasing
1
23.6
70.5
5.9
Hours worked
0.6
-0.4
+1.0
Increasing
1
14.6
71.4
14.0
Wages and benefits
24.6
15.5
+9.1
Increasing
34
28.3
68.0
3.7
Input prices
39.6
38.7
+0.9
Increasing
30
44.4
50.8
4.8
Selling prices
34.9
25.8
+9.1
Increasing
30
39.7
55.6
4.8
Capital expenditures
25.4
3.3
+22.1
Increasing
7
33.3
58.7
7.9
Inventories
6.3
0.0
+6.3
Increasing
1
20.6
65.1
14.3
Companywide Retail Activity
Sales
47.0
31.4
+15.6
Increasing
31
51.5
44.0
4.5
Internet sales
28.2
21.0
+7.2
Increasing
31
33.3
61.5
5.1
Catalog sales
11.7
5.7
+6.0
Increasing
3
17.6
76.5
5.9
General Business Conditions, Retail
Future (six months ahead)
Indicator Oct
Index
Sep
Index
Change Indicator
Direction*
Trend**
(months)
%
Reporting
Improved
%
Reporting
No Change
%
Reporting
Worsened
Company outlook
28.7
15.1
+13.6
Improving
30
32.4
63.9
3.7
General business activity
11.1
-4.5
+15.6
Improving
1
23.7
63.7
12.6

*Indicator direction refers to this month's index. If index is positive (negative), indicator is increasing (decreasing) or improving (worsening). If zero, indicator is unchanged.
**Number of months moving in current direction.
Data have been seasonally adjusted as necessary.

Texas Service Sector Outlook Survey

November 1, 2011

Current and future production

Downloadable TSSOS chart: Low-res (72 dpi) | Hi-res (300 dpi)

 

Texas Retail Outlook Survey

November 1, 2011

Current and future production

Downloadable TROS chart: Low-res (72 dpi) | Hi-res (300 dpi)

Texas Service Sector Outlook Survey

November 1, 2011

Comments from Survey Respondents

These comments are from respondents' completed surveys and have been edited for publication.

Accommodation
Capital expenditures will increase over the next six months as we are putting in a new RV park and adding 20 to 30 rooms in one of our hotels.

Credit Intermediation and Related Activities
We see light loan demand and a stagnant real estate market, but some recovery of previously charged-off loans. We have been successful in acquiring tenants in previously unoccupied foreclosed real estate properties.

Securities, Commodity Contracts, and Other Financial Investments and Related Activities
Retail sales are strong even though drought is hurting agribusiness. Farmer income should be down 30 percent from last year. Concern is growing about 2012 if the drought continues.

We are still fighting cost increases in health insurance, raw materials, property and personal property taxes and the costs to comply with federal and local regulations. It's a tough and unsure environment in which to work.

We are a multifaceted financial services firm. Our insurance business for wholesale and retail space is relatively stable and has seen a small growth. Our residential mortgage business—which provides no subprime loans and deals only with clients with credit scores that exceed 700— is exploding right now. About 30 percent is refinancing, and the rest are new loans. Our real estate development company is almost exclusively in multifamily housing development and doing very well; our average occupancy rate is 97 percent. Our automobile dealerships are also doing very well.

Real Estate
We are not expecting a restoration of certainty to the market until after the 2012 elections. Our confidence will remain low due to uncertainty relative to fiscal and taxing policies.

Professional, Scientific and Technical Services
Any projected improvement is slight. There is still not much optimism in client projections and plans. We anticipate a slight overall salary increase in 2012. We haven't had an across-the-board increase since 2007.

The phone has stopped ringing. The same thing happened in October 2008 when we first went into a slump. People quit buying.

Lack of congressional leadership and direction, along with a fragile uncertain economy, continue to hinder chances of a meaningful recovery in the real estate and building industries.

Some markets are softening due to overall general economic weakness, but activity in the oil and gas shale is growing.

This year has been surprising. Each month we brace for a downturn, and it does not materialize. The activity level, however, is constant, with residential transactions slightly behind last year but better than 2009 and reasonably profitable. Commercial real estate activity is a pleasant surprise with a substantial increase, pushing profitability year to date to a significant increase as well. All of this has been accomplished with fewer employees year to date (no layoffs, just attrition with limited replacement), but we do not have any plans to expand or hire in the coming year. We have also seen an increase in residential refinancing title orders this month as interest rates moved upward slightly, bringing out the waiters to catch the low rates. We don't know if we are poised on the edge of an upturn or a downturn, so we remain cautious to see which way the economy goes.

We really need the tight regulations on banks—especially smaller banks—to be appropriately modified to encourage them to lend on solid deals so we can get some economic activity.

Management of Companies and Enterprises
Federal regulatory burden continues to be the overriding factor that has restricted our company’s ability to expand services and employment. We think this is being replicated throughout the business environment across the country.

Administrative and Support Services
Though we have seen an increase in revenue, demand is flat. We are just executing better.

Ambulatory Health Care Services
The uncertainty of the healthcare regulatory reforms continues to be a factor in expenditures. Increasing regulation from the federal government has continued to consume more staffing hours to respond.

Food Services and Drinking Places
Nothing has changed so far into October from September, but that is not particularly good news since our sales softened a couple of months ago and are still very soft. We are up 1 percent over last year on a same-store basis, but we have taken 2 percent in price increases so we are actually down. The costs of goods have moved up so much over the last half year that we have finally given up trying to absorb them and will be taking a price increase—right now estimated to be 1 percent—by mid-November. The increase will not be sufficient to restore our margins completely. We do not feel the market will support the size of increase we actually need to take. We expect a serious increase in the cost of benefits—particularly health insurance—in January. We still hope to see some improvement in the economy in the holiday season—hence the optimistic six-month outlook.

Merchant Wholesalers, Durable Goods
We are investing in technology to increase service levels to our customers. A byproduct of that will likely be further headcount reduction. We just got our health care renewal, which increased 21 percent over last year. We wonder how many employees will be able to afford it and hope we will not lose too many folks because of it.

We are moving forward. We see opportunity and are laying the ground work. Construction of multifamily and single-family homes is improving. Commercial construction is weakening, but bodes well going forward.

Typically, the glass industry sees a spike in business six to 12 months after projects are initiated by the construction industry. However, the unique positive outlook for our company is due to bankruptcies by two of our three main competitors. In our opinion, the construction industry remains short on capital and is still stagnated by a lack of funds for nongovernmental projects that the smaller “storefront business” owners will participate in; these are the businesses that will jump-start jobs to the nation's unemployed.

We suddenly in October have dropped 12 percent across all operations. This would indicate a broad-based slowdown in construction activity. It’s too early to tell if the decline will continue, but it’s certainly something to watch. Otherwise, we are fairly optimistic going into the winter and spring 2012 that business conditions may be better than they were in 2011.

Building Material and Garden Equipment and Supplies Dealers
On the positive side, demand is supporting slightly higher prices. On the negative side, demand is inconsistent. There are several months of good quotes and sales followed by several months of lackluster demand. The result of this misfiring economy is that we are reluctant to start rebuilding our employee base.

Business is still slower than it should be, putting pressure on margins. We'll continue to work hard and make the adjustments necessary to keep things going. It’s not much fun for owners or employees these days.

Motor Vehicle and Parts Dealers
We think that the low interest rates have not been passed to the final users—Main Street businesses or individuals.

Hesitancy to buy is still there. Basically the word tepid describes our business and reflects the attitude of our major customers.

The auto business remains stable with the pipeline back to normal for Japanese-supplied franchises. Unfortunately, good manufacturer incentives and marketing programs are offset by continuing political turmoil and malaise in the economy overall.

Texas Service Sector Outlook Survey

Historical Data

Historical data can be downloaded dating back to January 2007.

Indexes

Download indexes for all indicators. For the definitions of all variables, see Data Definitions.

Texas Service Sector Outlook Survey
 
Texas Retail Outlook Survey
Unadjusted excel   Unadjusted excel
Seasonally adjusted excel   Seasonally adjusted excel

All Data

Download indexes and components of the indexes (percentage of respondents reporting increase, decrease, or no change). For the definitions of all variables, see Data Definitions.

Texas Service Sector Outlook Survey
 
Texas Retail Outlook Survey
Unadjusted excel   Unadjusted excel
Seasonally adjusted excel   Seasonally adjusted excel

Questions regarding the Texas Service Sector Outlook Survey can be addressed to Amy Jordan at amy.jordan@dal.frb.org.

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